OREANDA-NEWS. S&P Global Ratings today assigned its 'BBB-' issue-level rating (two notches above the corporate credit rating) to Nashville-based HCA Inc.'s proposed 7.5-year, $1 billion senior secured term loan B-7, which is being issued to refinance the company's term loan B-4 maturing in 2018. We assigned a '1' recovery rating to this debt, indicating our expectation of very high (90% to 100%) recovery for lenders in the event of a payment default. The issue-level ratings are the same as our ratings on the existing senior secured debt.

Our 'BB' corporate credit rating on HCA reflects our view that its scale relative to other health care services peers should allow the company to better offset declining reimbursement rates with cost reduction efforts, and that its scale and market presence should aid in contract negotiations with commercial payors. In addition, HCA's business is diversified beyond inpatient hospital services, with about 38% of revenues coming from outpatient procedures. These factors are only partially offset by our view that HCA is exposed to reimbursement pressure as government and commercial payors seek to control costs, and its business is geographically concentrated in two states, Texas and Florida, which together represent about half of the company's revenues.

Our ratings on HCA also reflect our view that the company will maintain leverage around 4x and generate funds from operations (FFO) to total debt in the mid - to high-teens area. Our ratings also incorporate our expectation that HCA will continue to generate significant operating cash flow, but we expect the company to invest heavily in capital expenditures and to continue to prioritize shareholder return over debt repayment.

For the corporate credit rating rationale on HCA, please see the summary analysis published on Nov. 3, 2015.